To ensure that a marketing plan is performing as expected, businesses often complete a marketing audit. This usually consists of a review of all tactics and their results. Such results typically include consumer response to a promotion or event, the cost, and a review of sales and other activity that stemmed from each tactic. Usually, a review and update of an annual marketing plan follows a promotions study.
Each marketing tactic is reviewed in depth to determine if the tactic increased business. Another important factor in this analysis is deciding if the sales generated from each promotion were worth the its expense. Generally, the cost per lead and cost per sale can help to determine this.
The cost per lead is the total cost of the tactic, divided by the number of responses or inquiries generated by the individual marketing or advertising promotion. When the total promotion cost is divided by the number of completed sales, the result is the cost per sale. For example, company A spends $10,000 US Dollars (USD) on a direct mail package that generates $5,000 USD in sales. The cost per sale is therefore $2 USD.
A company must also review its place in the market, compared to its competitors and how current economic and social factors may affect its business. As a result, a marketing audit generally includes a study of current external and internal factors. These factors include a study of competitors’ products, pricing, brand awareness, local and national economic health, and internal business operations.
Companies can use one or several different approaches to study these factors. Common marketing audit report formats include a strengths-weaknesses-opportunities-threats (SWOT) analysis; a five forces analysis; and a political-economic-social-technological (PEST) study.
Using SWOT, a business lists its advantages and disadvantages, compared to its competitors or businesses that produce similar products. Also included is a check of all market conditions that can either help or hurt the company’s chances of success. These conditions include economic factors, as well as any challenges a competitor may bring to the marketplace. The company also typically reviews its internal operations and procedures.
A five forces analysis is a similar marketing audit study. Generally, this format is used to review an individual product or business unit, instead of the entire marketing plan. Using this approach, the marketing team reviews similar subject matter covered in a SWOT analysis, and combines these findings into five groups. These groups are labeled the power of buyers, threat of entry, competitive rivalry, the power of suppliers, and the threat of substitutes.
PEST is another marketing audit format alternative. Some marketers change the order of the letters in PEST and call this a STEP study. A PEST or STEP marketing audit usually focuses on factors that are mainly out of the company’s internal controls. Study subjects include political climate, economic health, social outlook, and technology that can be used to deliver the product. PEST is similar to the opportunities and threats portions of SWOT.